Demonstrating value as a financial advisor

March 04, 2020 by Ryan Dvornik

Demonstrating value as a financial advisor by Advicent

About the author

Ryan Dvornik

Business development representative

Ryan Dvornik is a business development representative at Advicent, the financial planning technology provider of choice for nearly 100,000 financial professionals.

In times of uncertain, volatile markets, many investors will find themselves struck with fear over the possible negative outcomes that may be around the corner. In these situations, financial advisors are essential to help guide clients and avoid making rash decisions that will negatively impact their long-term financial futures. Times of financial unrest present an opportunity for advisors to show their worth to clients and reiterate the importance of proper planning.

Cerulli’s latest U.S. Advisor Metrics report outlines an array of challenges that advisors, firms, and the financial services industry at-large are facing. To learn about some of the key practice management challenges firms are facing today, I encourage you to check out my colleague Charles Jacques’ post 'Practice management challenges facing firms in a new decade.'

Here is a look at some of the key findings and how advisors can portray their value in these unpredictable times.

How investors perceive advisor value

In Cerulli’s report, it was found that just 51 percent of U.S. households indicated they are willing to pay for financial advice. The most willing to pay for advice is the client segment with $1 million to $2 million in investable assets at 59 percent, while the lowest is segment falling in the $250,000 to $500,000 range.

While this number may seem low, Cerulli notes that this is largely due to many investors not fully understanding how or if they already pay for financial advice. The report goes on to state that, “in situations where an advisor’s fees become an issue for clients, the advisor has typically failed to clearly articulate and demonstrate the impact of their work. Advisors who clearly convey their value proposition are least likely to experience client pushback regarding their fee levels.”

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Planning will continue to be key for firms

So rather than having a strong opinion on not wanting to pay for financial advice, many clients just might not be aware of how they are getting value from their current advisor relationships.

Imagine if you reached for the check at a restaurant and you see they tacked on an additional percentage of the meal just for cooking services. Poll just about any consumer and they would tell you they would rather not pay this fee and that the cost of the meal on the menu should reflect the final cost. The same can be said for consumers of financial services, ask them if they would be willing to pay for financial advice, and many might quickly think “no” but not realize the ways they are already getting that value from their advisor.

This will be a key issue for firms to alleviate as planning gains a larger focus for the industry moving forward. Currently, 40 percent of advisors derive 90 percent or more of their revenue from advisory fees. By 2021, this number will rise to 56 percent. With pressure coming from beyond the traditional brick and mortar competitors in the form of robo advisors, practices need to consider how important value perception can be.

Further, with the great wealth transfer looming and a new generation of highly valuable clients around the corner, firms need to prepare their books of business for tomorrow. Roughly half (49 percent) of children and a majority (86 percent) of grandchildren have had limited or no interaction with their family’s financial advisor. It is imperative for firms to flip the script on this trend because high-net-worth households with over $5 million are the most likely to have more than one advisor due to the depth of needs in both the short and long-term. Competition for these valuable clients will only continue to accelerate in this new decade.

Delivering and highlighting advisor value

So how can advisors start demonstrating the value they provide – especially in the case of a rapidly changing economy? A good place to start is incorporating tools that help reduce the mundane aspects of financial planning that clients may view as invaluable. By defining a planning process and creating a consistent workflow, advisors can fast-track the customer journey through those monotonous steps of onboarding and arrive to value-add activities faster. Prospective clients who are worried about the future want to find answers quickly that can provide some peace of mind. Even current clients may be concerned about market activity and want a quick check-in on how they are doing. For these situations, consider digital tools that help firms reduce time spent onboarding clients, expedite their planning process and allow clients access to their financial plans through a digital client portal.

With NaviPlan, we offer a wide spectrum of services to help firms accomplish this. First, the eFact Finder empowers firms to expedite the onboarding experience so that advisors and clients can focus on what matters most. Document requests and fact-checking are reduced to a minimum compared to the process using legacy systems such as Excel.

Then, when moving into complex need discussions, NaviPlan is able to efficiently scale to incorporate a variety of detailed planning capabilities such as advanced tax planning, equity compensation, and estate planning.

Finally, advisors can continue to demonstrate their value over time by enabling clients to gain a deeper connection with their advice through the NaviPlan client portal and by making meetings more productive and engaging with the NaviPlan Presentation Module.

At a time when many investors are losing sleep over the possible negative impacts of economic volatility, advisors can shine by alleviating their fears with proper planning and deeper client connection.

Questions about how NaviPlan is built to help your firm demonstrate value to your clients? Click here for more information and feel free to reach out to our sales team here at Advicent.